Government to get around Rs 3,639 crore from CDMA spectrum auction

NEW DELHI: The government will get around Rs 3,639 crore from the 2G spectrum auction for CDMA services, which ended today with Russian conglomerate Sistema's Indian unit SSTL being the only bidder.

However, the government may not get any upfront payment as Rs 1,626 crore has to be adjusted against SSTL's earlier payment, sources said.

The auction, which lasted just around four hours, drew no bids for Mumbai, Maharashtra and UP East, they added.

The auction for 2G spectrum for GSM players held in November last year was spread across three days fetching the government Rs 9,407 crore.

The CDMA sale did not take place in November as there was no participant due to high cost.

Government has since then reduced the spectrum base price by 50 per cent but still no company, except SSTL, showed any interest.


In 2010, spectrum auction for 3G services ended after 34 days and 183 rounds of bidding. This was followed by 16-day long auction for wireless broadband (BWA) spectrum.

Sistema Shyam Teleservices (SSTL) had deposited Rs 613.75 crore for the auction, which made it eligible to bid for minimum quantum of 2.5 Megahertz spectrum (two blocks of 1.25 Mhz airwaves frequency) in 11 circles.

However, the company bid for only eight circles, which means it may curtail operations in three more circles.

The company has already announced discontinuation of services in 10 out of 22 telecom circles - Assam, Andhra Pradesh, Bihar, Himachal Pradesh, Haryana, Jammu and Kashmir, Madhya Pradesh, North East,
 Orissa and Punjab.

ABDUL WAHEED
PGDM 2nd SEM.
IIMT COLLEGE OF MANAGEMENT
 

Rupee hits near two-month low; good support seen for now

 

 

 

Mumbai: The Indian rupee hit a near two-month low in early trading on Monday, tracking losses in most other Asian currencies, although some corporate dollar selling helped prevent broader losses in the local currency.

At 9.08am, the rupee was at 54.94/95, marginally weaker than its close of 54.90/91 on Friday. The unit dropped to as low as 55.15 in opening trades, its weakest since 8 January. At 9.22am, the BSE’s benchmark Sensex was trading at 18,862.23 points, down 0.30%.

Sentiment for the rupee has been bearish after a close above 54.80 on Friday, traders said. However, the dollar-rupee pair should see good technical resistance at around 55.15, ahead of the 55.89 peak in November. 

 

 

Avinash kumar

PGDM 2nd sem.

Budget Impact: Smokers to pay more

Smokers to pay more:

Key points 

• Excise duty increased by 18%: The Government of India has implemented a weighted average excise duty hike of 18% on cigarettes in the Union Budget 2013-14 (the basic excise duty on cigarettes has been increased by about 21%). This is the second consecutive year of a significant increase in the excise duty on cigarettes in India. We were expecting the excise duty to increase by only 6-8% in view of the fact that the excise duty on cigarettes had been increased significantly in the last year's Union Budget. 
• Price increase of ~14% to neutralise the impact: ITC enjoys strong pricing power in the Indian market. We believe it will have to hike the prices of its cigarettes by around 14% to maintain the cigarette business' earnings before interest and tax (EBIT) margin in the range of 31-32%. However, the prices would be increased largely in a phased manner, as the company would be closely monitoring any significant increase in the value added tax (VAT) rates of the key states. Also, the company had increased the prices of its cigarettes significantly in the quarters following the sharp increase in the excise duty in the Union budget 2012-13 which had taken some time to get absorbed in the market.
• Volume growth to remain subdued in FY2014: The price increase of around 15% will have an impact on the sales volumes of the company. We expect the sales volume growth to remain subdued in FY2014, as the cigarette smokers have to pay a significantly high price for a stick of cigarette. We have revised downwards our volume growth assumption to 1% (fro mid-single digit earlier) for FY2014. 
• National launch of 64mm cigarettes shortly: In the recent budget the government has spared cigarettes of length not exceeding 65mm from any excise duty hike. ITC's launch of 64mm cigarette is gaining good response in 17-18 domestic markets. We expect the national launch of 64mm in the coming months.
• Valuation and outlook: This is the second consecutive year of a significant increase in the excise duty on cigarettes. In view of the company's strong pricing power and the price inelastic nature of the product category, we expect ITC to take price increases in its cigarette portfolio in the coming quarters to safeguard its margins. We need to keenly monitor the impact of the price increase on the sales volume of the cigarette business and the quantum of increase in the VAT rate in the key states. We broadly maintain our earnings estimates for FY2014 and FY2015. At the current market price the stock trades at 30.4x its FY2013E earnings per share (EPS) of Rs9.6, 25.3x its FY2014E EPS of Rs11.5 and 21.3x its FY2015E EPS of Rs13.6. We maintain our Buy recommendation on the stock with a price target of Rs340.
  
  
  RAZI ANWAR
  PGDM 2nd year

Union Budget 2013-14: Lacks pragmatism; creates confusion

The Union Budget for FY2013-14 has failed to meet the heightened expectations of the Street. There are no big-bang announcements to revitalize the investment cycle or any material incentives to attract savings in the capital markets. But the key issue that has unnerved the equity market is the confusion over the retrospective changes suggested in Section 90A of the Income Tax Act relating to existing tax relief to foreign investments from countries having a Double Taxation Avoidance Agreement (DTAA) with India.

The high expectations were built due to the policy activism shown by the government in the past few months and the commitments made by the finance minister during his recent interaction with foreign investors. But the issue created by the unimaginative drafting of the explanation for Section 90A has now caused confusion among foreign investors. The finance minister and his team did clarify in the post-budget speech during a media interaction that nothing new has been incorporated and the situation would largely remain unchanged. However, the uncertainty has dented sentiments and come at a time when the finance minister has himself highlighted the dependence of Indian economy on foreign inflows (to the tune of $75 billion in FY2014) for controlling the widening current account deficit.

Apart from these two issues, the budget was largely in line with expectations on the macro-economic front. The finance minister did achieve the fiscal deficit target for FY2013 (at 5.2% instead of 5.3% targeted in the last budget) and set a target of 4.8% for FY2014. The net market borrowings figure of Rs4.84 trillion is also within tolerable limits. The finance minister has promised to introduce the direct tax code (DTC) by the end of the current session of the Parliament and is hopeful of finalizing the Goods and Services Tax Bill in this year. Therefore, the big picture is not so disappointing though there is a sense of missed opportunity among certain sections. However, we believe that the finance minister will keep the ball rolling with a series of policy announcements outside the budget to tackle serious issues like subsidies, restructuring of the state electricity boards (SEBs), pushing investment projects and removing bottlenecks in certain segments of the infrastructure sector. Consequently, we believe that the equity market will get over the budget related hiccups. We maintain our constructive view on the market in view of the cyclical upturn expected in FY2014, further easing of the monetary policy and a benign global environment.

RAZI ANWAR

PGDM 2nd Year

Budget 2013: Residency certificate not enough to claim tax treaty benefits

Finance Bill amendment may spark fears that tax authorities will have wider discretion to go after foreign investors 

 

The Finance Bill is part of the 2013-14 budget unveiled by finance minister P. Chidambaram on Thursday. Photo: Hindustan Times 

 

 

                 Mumbai: India said a tax residency certificate was necessary but no longer enough to claim benefits under double taxation avoidance agreements, according to the Finance Bill tabled in Parliament on Thursday.

The amendment is sparking fears that tax authorities would have wider discretion to go after foreign investors who have usually benefitted from investing from countries such as Mauritius that have double-tax avoidance treaties with India.

The suggested amendment comes about a year after poorly written rules to ensnare tax evaders, called the General Anti Avoidance Rules (GAAR), had sparked an outcry among foreign investors, prompting the government to amend their provisions and delay implementation for two years.

The Finance Bill document unveiled on Thursday said the tax residency certificate “shall be necessary but not a sufficient condition for claiming any relief” under the double taxation agreements starting in April 2016, at the same time that GAAR is due to take effect.

The Finance Bill is part of the 2013-14 budget unveiled by finance minister P. Chidambaram on Thursday.

Tax analysts said the amendment could create confusion among foreign investors about whether they would be disqualified from taking advantage of double tax avoidance treaties.

They said the amendment did not make clear what criteria, apart from the residency certificate, tax authorities would use to determine whether an investor had breached rules.

“From an international investor standpoint, the reference to a tax residency certificate being a necessary, but not sufficient, condition for claiming tax treaty benefits is disturbing,” said Ketan Dala, a joint tax leader at PwC India.

“This does create significant uncertainty.”

Indian shares were hit in part by concerns sparked by the amendment, with the benchmark BSE index Sensex ending down 1.5%.

“The assessing officer may become more powerful,” said Homi Phiroze Ranina, an advocate at the Supreme Court of India and former director at the board of the central bank. He predicted more ligitations could result.

Foreign investors are an integral part of Indian markets, given the country needs capital flows to plug a current account deficit that hit a record high in the quarter ended in September.

Chidambaram met foreign investors last month to hear their views about Indian markets.

Net inflows from foreign investors into stocks reached $24.55 billion last year, helping the BSE index gain 25.7%

Chidambaram said on Thursday India would need more than $75 billion this year and next year to fund its current account deficit.

 

TOUHID HUSSAIN

PGDM 2 SEM

Govt issues clarification on tax residency certificate

 Tax department will not question residency status of an investor upon receiving tax residency certificate 

 

The government said concerns pertaining to TRC will be addressed when the Finance Bill is taken up for consideration by the Parliament. Photo: Ramesh Pathania/Mint  

                

                 New Delhi: In a bid to assure foreign investors, the government has clarified that the tax residency certificate (TRC) produced by an investor will be accepted by the authorities and the tax department will not question his residency status upon receiving the certificate.

The government, in a statement, also said concerns pertaining to TRC will be addressed when the Finance Bill is taken up for consideration by the Parliament.

A foreign investor has to obtain a TRC from the resident country to claim tax benefits under the double tax avoidance agreements India has with other countries. Giving respite to investments routed from Mauritius, the government also stated that circular number 789 continues to be in force, pending treaty negotiation between India and Mauritius.

Circular 789, issued in the year 2000, provides that tax residency certificate issued by Mauritius Revenue Authority is sufficient evidence for claiming tax treaty benefits.

The inclusion of the clause that TRC is a necessary but not sufficient condition in the Finance Bill tabled in Parliament on Thursday had apprehensions among foreign institutional investors, who route their investments into India from tax havens like Mauritius.

New Delhi: In a bid to assure foreign investors, the government has clarified that the tax residency certificate (TRC) produced by an investor will be accepted by the authorities and the tax department will not question his residency status upon receiving the certificate.

The government, in a statement, also said concerns pertaining to TRC will be addressed when the Finance Bill is taken up for consideration by the Parliament.

A foreign investor has to obtain a TRC from the resident country to claim tax benefits under the double tax avoidance agreements India has with other countries. Giving respite to investments routed from Mauritius, the government also stated that circular number 789 continues to be in force, pending treaty negotiation between India and Mauritius.

Circular 789, issued in the year 2000, provides that tax residency certificate issued by Mauritius Revenue Authority is sufficient evidence for claiming tax treaty benefits.

The inclusion of the clause that TRC is a necessary but not sufficient condition in the Finance Bill tabled in Parliament on Thursday had apprehensions among foreign institutional investors, who route their investments into India from tax havens like Mauritius. 

 

TOUHID HUSSAIN

PGDM 2nd SEM

Economic Survey: 2013/14 GDP growth pegged at 6.1-6.7 per cent

 

The finance ministry on Wednesday released the Economic Survey 2012-13, a day before Finance Minister P Chidambaram unveils the budget. Here are the highlights:

• Free legal services benefit more than 7.82 lakh persons from 1st April, 2012 to 31st October, 2012
• Expenditure on social services increased considerably in 12th Plan
• Upward trend in employment maintained; Overall employment increased by 6.94 lakh in June 2012 over June 2011
• Economic Survey acknowledges benefits of market diversification
• Measures taken by government to protect consumers from price rise 
• Rs 12,517 cr capital to be infused in PSB'st to augment their Tier-1 Capital
• Fast agricultural growth remains vital for jobs, incomes and food security
• Raising tax to GDP ratio to more than 11 pc critical for sustaining fiscal consolidation
• Robust Inflow of FDI in the Services Sector
• Chandigarh tops with highest share of services in GSDP with 85%
• India has highest increase in share of services in GDP at 8.1%
• Govts key initiatives to boost manufacturing 
• Government to raise Rs 40,000 cr through disinvestment  
• Growth outlook for developed nations uncertain
• Higher agri output to lower inflation
• Employment rose 1.6% in the last decade
• Direct cash transfer to curb leakages
• Pegs FY14 GDP growth rate at 6.1 to 6.7 per cent
• Oil subsidy key fiscal risk
• Reforms should be accelerated to boost growth
• Foreign Exchange reserves remains steady at $295.6 bn at Dec 2012 end
• Need to cut impediments for investment
• Tax base should be increased
• 5.3% fiscal deficit target achievable
• WPI inflation may decline to 6.2-6.6%
• Railway freight grows by 5.1 per cent in 2012-13
• Need to cut subsidy and leakages
• IIP growth may remain sluggish
• Room to increase exports limited
• Need to curb gold imports
• Recent steps to boost FY14 outlook
• Diesel price hike to put upward pressure on inflation
• Lower inflation to create room for rate cuts
• Food subsidy bill to increase subsidy
• Trade deficit, CAD a matter of concern
• Fiscal consolidation key to high growth
• WPI inflation to continue to moderate

Touhid Hussain
PGDM 2ND SEM